Reciprocal agreements relieve employees who work and live in different states from the double burden of paying taxes in both states, requiring payment only to their home state. If any of your employees are subject to reciprocal agreements, you can help them out by withholding income tax for their state of residency. How Reciprocal Agreements Work Many states that impose an income tax have entered into reciprocal agreements. For example, Kentucky has reciprocal agreements with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia and Wisconsin. Residents of any of those states working in Kentucky are exempt from Kentucky income tax, and would pay and file income…
